Indian Oil, Hindustan Petroleum and Bharat Petroleum Fall Up to 5% Today; Check the Reason

Synopsis: The Shares of Indian Oil Corporation, Hindustan Petroleum, and Bharat Petroleum fell up to 5% after HSBC downgraded them, cutting earnings estimates and valuations, citing higher crude oil prices as a risk for potential marketing losses.

The Shares of state‑run oil marketing companies slumped up to about 5 percent in intra‑day trading after global brokerage HSBC cut earnings estimates and trimmed price targets for these stocks.

What Happened 

The shares, including Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation, are trading lower by up to 5% on Monday, March 16, following a downgrade by HSBC. The brokerage cut earnings estimates and valuation multiples, citing higher crude oil prices as a risk that could lead to marketing losses even if crude averages around $75 per barrel.

Here’s the logic behind their concern

• Higher crude oil prices increase costs:  For companies involved in marketing, refining, or distribution, rising crude prices can increase operational costs. Even if the company’s crude price hedging or purchases keep the average around $75 per barrel, fluctuations above expectations can lead to unexpected marketing losses or squeeze profit margins.
• Impact on earnings estimates: Because the brokerage sees this cost risk, they anticipate that profits might be lower than previously projected. Hence, they reduce the earnings forecast.
• Impact on valuation multiples:  Investors typically pay more for companies with stable, predictable earnings. If higher oil prices introduce uncertainty and the potential for losses, the brokerage may apply a lower multiple to earnings (like the Price-to-Earnings ratio), which reduces the implied stock valuation.
• Market sentiment: By highlighting this risk, the brokerage is signaling to investors that even moderate crude prices could be problematic if costs rise unexpectedly, which could dampen enthusiasm and weigh on stock performance.

HSBC downgraded Targets

Indian Oil Corporation is India’s largest oil refining and marketing company, involved in refining crude oil, selling petroleum products (like petrol, diesel, LPG), and operating pipelines and terminals across the country. HSBC downgraded Indian Oil Corporation to ‘Hold’ and cut its price target to Rs. 150 from Rs. 200.

With a market capitalization of Rs. 2,10,265.24 Crores in the day’s trade, the shares of Indian Oil Corporation Ltd declined by up to 5.3 percent, reaching a low of Rs. 148.20 compared to its previous close of Rs. 156.50.

Hindustan Petroleum Corporation Limited (HPCL) is one of India’s largest state‑owned oil and gas companies, playing a major role in the country’s energy sector. It is a Maharatna Central Public Sector Enterprise (CPSE) and is listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE). It was also downgraded to ‘Hold’, with the target price reduced to Rs. 360 from Rs. 620.

With a market capitalization of Rs. 75,175.97 Crores in the day’s trade, the shares of Hindustan Petroleum Corporation Limited declined by up to 5 percent, reaching a low of Rs. 350.50 compared to its previous close of Rs. 368.95.

Bharat Petroleum Corporation Limited (BPCL) is one of India’s major state‑owned energy companies and a cornerstone of the country’s oil and gas sector. It operates as an integrated energy company, meaning it’s involved across the fuel value chain, from refining crude oil to marketing finished products to consumers. Similarly, Bharat Petroleum was downgraded to ‘Hold’, with the price target lowered to Rs. 340 from Rs. 470.

With a market capitalization of Rs. 1,32,583.62 Crores in the day’s trade, the shares of Bharat Petroleum Corporation Limited declined by up to 4.3 percent, reaching a low of Rs. 305.15 compared to its previous close of Rs. 319.10.

According to Bloomberg data, Hindustan Petroleum (HPCL) sees a majority of analysts bullish, with 23 out of 34 recommending a Buy. Indian Oil Corporation has 20 of 34 analysts favoring a Buy, while Bharat Petroleum (BPCL) has 24 out of 33 analysts giving a Buy rating, reflecting generally positive market sentiment across these major Indian oil companies.

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